Federal support for terrorism insurance, like bank deposit insurance, addresses a permanent failing of the private market to provide necessary coverage and should be continued, according to a new Bloomberg Government Analysis.
The Terrorism Risk Insurance Act (TRIA) is scheduled to expire at the end of 2014. The insurance industry is unanimous in arguing that it should be extended. The industry and many experts believe insurance coverage for acts of terrorism would be less available without TRIA, potentially curtailing construction of high-profile commercial projects.
After 9/11, the supply of terrorism insurance policies virtually disappeared. Following TRIA’s enactment, commercial take-up rates rose to more than 60 percent in 2012 from 27 percent in 2003. Acts of terrorism remain almost impossible to build into traditional insurer pricing models because they are deliberate and not random events.
Arguments by some critics of TRIA that the private market is ready and able to step in to fill the void, have almost no academic support, according to the analysis.
Three House bills — H.R. 508, H.R 1945 and H.R. 2146 — all seek to extend the program. H.R. 508 and H.R. 2146 have been referred to House Subcommittee on Cybersecurity, Infrastructure Protection and Security Technologies.
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